What is Crypto Mining? How Does Mining Work?

What is Crypto Mining? How Does Mining Work?

Cryptocurrency mining started with Bitcoin, and the bizarre but simple idea of ​​the creator of bitcoin made cryptocurrencies so valuable in terms of ideas and performance. Do you know what mining is? 

Mining is a process that many people consider a method to make money. However, cryptocurrency mining has more important applications. It is used for many cryptocurrencies, including Bitcoin and Ethereum version 1, and it ensures the security and stability of the blockchain.

What is crypto mining?

Mining cryptocurrency is a process in which the miner uses the computing power of his computer to process transactions and earn rewards. It is the process of adding new transactions to the blockchain. In return for this action, miner receives a reward in the form of the common cryptocurrency of the same blockchain. For example, if bitcoin is mined, the reward is bitcoin. The network pays this reward, and no funds are deducted from anyone. The blockchain makes money in the process.

One of the main features of mining is the concentration of resources. Mining requires a large amount of computing power that can meet the needs of the blockchain. In addition, the network allows all participants in the process to agree on the efficiency and accuracy of the blockchain. Participants have plenty of electricity to participating in the mining.

Mining requires special software to solve math problems and transaction confirmation to verify the creation of the block. These blocks are added to the general ledger every 10 minutes. When the software solves the transaction, the miner receives a certain cryptocurrency. The faster the miner hardware processes these math problems, the quicker it will confirm transactions and receive rewards. Of course, not all blockchains work this way to confirm transactions. This method of confirming transactions is known as Proof of Work.

What is Proof of work?

Proof of Work (POW) is an agreement protocol defined to prevent malicious behavior in the blockchain network and maintain network security and stability. The work required usually involves performing a series of operations, algorithms, and mathematical calculations performed by miners. These calculations vary depending on the blockchain network they want to participate in.

Each mathematical problem can only be solved using a set of heavy calculations. It is done today using specialized computers that miners buy just for this purpose. Miners can be rewarded when these mathematical problems are solved. In addition, it should be noted that the difficulty of making a profit increase depending on the number of people trying to mine. Blockchain creates coins (or value or money) during the cryptocurrency mining process. The more transactions miners make, the more rewards they receive.

How Does Bitcoin Mining Work?

The First Step: Hashing the Transaction

Miners hash the unapproved transactions in the first step. A hash is a one-way function that generates unique outputs for input data. The transaction hash contains information and numbers that indicate the sender and receiver address. In addition to hashing and listing each transaction separately, Miner also adds a custom transaction in which it sends a block reward. This transaction, called Coinbase, is located at the beginning of the block.

The Second Step: Building a Merkel Tree

The transactions are placed in an abstract tree called Merkel. The tree is created by putting transaction hashes in pairs and then hashing them. Once the hashing operation is complete, the root of this tree indicates the previous hashes. 

The Third Step: Finding a Valid Header Block

A header is an identifier that identifies data, and through a header. When a new block is created, the miners create a new hash block by combining the previous hash block with the root hash. However, this block must still have another data known as a nonce. Therefore, the miners try to find a valid hash by changing the nonce.

Satoshi Nakamoto added a new restriction to the Bitcoin blockchain to make the process more difficult. The complication of block confirmation makes it impossible for anyone to confirm a new block without spending time and hard processing and to save the stability of the network. Satoshi's initiative on the Bitcoin blockchain was to create a number called a hash rate.

The hash rate is the number that the user's estimated nonce should be less than it. This number is usually between zero and one. This process of forming a Merkel tree and correctly guessing nonce is the mathematical problem that miners are said to have to solve in mining cryptocurrency. Naturally, the higher the processing power of the miner computer, the faster it will do so.

The Fourth Step: Transaction Confirmation Announcement

Now imagine that a miner was able to guess the right nonce. He immediately announces to all network nodes that he has assumed the number correctly. The rest of the network nodes check the claim of this node to verify the claim. Once miner's claim is correct, everyone is required to confirm the transaction on their ledger. Ledger is a book of the history of all blockchain network transactions that all network nodes and miners have a copy of and need to be constantly updated.


Cryptocurrency mining is a revenue-generating process in which POW blockchains operate to confirm a transaction. This method makes the network secure and reliable. If you are also planning to mine and become a miner, consider the costs and risks first, and then start mining with a lot of research and legal restrictions.